Innovation incubation

Like most of its clients, the MG&E Innovation Center is growing

Paul Slattum and UW–Madison student intern Kira Machnick, employees of Mirus, know that the early stages of launching a company are often cramped and chaotic. An expansion of the MG&E Innovation Center in University Research Park will give companies such as Mirus, a fledgling firm launched by Slattum that creates products to improve the success of gene therapy, more room to grow.

As a tenant of the MG&E Innovation Center for more than six years, Tetrionics Vice President Herbert Paaren wryly observes that his company had the same gestation period as a blue whale.

But during that slow, lumbering process of developing and marketing new drugs, Tetrionics weathered the lean years of high-risk startups with the help of the Innovation Center. The center provided shared clerical support and conference rooms, made available sound financial advisors and created a culture of support for small companies with big ideas, Paaren says.

The payoff: Tetrionics is now a thriving company, which relocated in 1997 to more spacious digs in the University Research Park. The company manufactures the active ingredients for a number of vitamin D-based drugs, which are providing new therapies for osteoporosis and cancer.

“The center gave us the opportunity to look like a big company, even when we weren’t,” Paaren says.

Paaren did postdoctoral work in the UW–Madison biochemistry department from 1977-1981, and, like many center tenants, took his academic ideas to the business world. The center is especially helpful for people who know the science, but have business naiveté.

The small-business reality is understood. “This is your life: You’re small, you have limited resources, deal with it,” Paaren says. “Everyone who was in there knew it was a high-stakes game.

“The unexpected is the camaraderie in a center like that,” he adds. “The smallness is a virtue. You kind of feed off other people’s success.”

Beginning this year, the Innovation Center will be sharing in some of that success, under a plan to enter a new building and roughly double its available space. On Monday, the University Research Park Board of Trustees approved a plan to construct a new 40,000-square-foot building in the park’s west property. Half of that new space will be devoted to the Innovation Center, which has operated since 1989 in half the space the new building offers.

Construction on the roughly $5 million facility will begin this fall, with occupancy slated for early 1999.

Wayne McGown, director of the Research Park, says the Innovation Center’s success has exceeded almost everyone’s expectations. Of its 26 small- business tenants since 1989, all but three have been successful, and four of them have relocated to permanent spaces in the Research Park.

In addition, companies with beginnings in the center have been directly responsible for 175 new jobs. That’s an impressive figure, McGown says, since these businesses typically begin with only one or two people.

“The general experience of business startups in the United States has been about a 20 percent success rate,” McGown says. “Here we are closer to 90 percent.”

Why the difference? McGown says the biggest factors are the level of support and mentoring that occurs. As part of the rental, companies receive limited clerical services, a shared receptionist and shared equipment and conference rooms. Strategic financial and marketing services are provided by Venture Investors Management, which serves as building manager for the center.

About half of all startups have grown out of UW–Madison research innovations, McGown says, and the added space will allow the center to encourage that technology transfer even further. The center is ideally suited for university-based startups, since they typically have slow revenue flow, are high- risk and their founders may have limited business knowledge.

Access to UW–Madison is also valuable for many companies. Bruce Davis, co-founder of The Madison Group, a center tenant since 1995, says the company grew out of a number of software advances in the mechanical engineering department. Davis and co-founder Paul Gramann were both students under mechanical engineering Professor Timothy Osswald, and they still meet weekly with Osswald to keep updated on his work.

The Madison Group produces software that simulates different types of polymer processing, such as injection molds for the auto and electronics industry. The mechanical engineering department has been a crucial link for them; they’ve hired current graduate students to help program software.

Greg Hyer, associate director of the park, says the park initially gambled on the idea that Madison needed more small-business laboratory space. The gamble paid off and the center has been operating at 100 percent occupancy for almost all its existence. They stuck close to the Research Park’s mission of leasing to companies with high-tech ventures, such as biotechnology, software, drug development and medical technology.

Madison Gas and Electric played a leadership role in getting the center started, by providing initial capital funding and securing other matching grants from the state. The utility also guaranteed rent at the center before turning the development over to park management. MG&E has an interest in continuing to participate in the new center, Hyer says.

By supporting companies in their earliest stages, Hyer says the center has been good for both the entrepreneur and the Research Park.

“The Innovation Center is really a form of seed capital to help people create new business for the park,” he says. “It’s like a farm team system in baseball. It’s creating opportunities to find rapidly growing companies and nurture their progress. That’s the best way to build a park, by growing your own companies.”